Understanding the Basics of a Self-Managed Super Fund in Australia

As a quality finance and accounting service provider, D&V Philippines makes it a point to well-verse ourselves in the different financial and wealth management strategies available to individuals and entities over the world. True to this testament, one of the ways that we help our clients in Australia is by helping them with their SMSF and their financial management options.  

 
For individuals in Australia, a Self-Managed Superannuation Fund (SMSF) is one of the most common retirement fund options that gives the holder the autonomy to make decisions on how their funds and finances are managed.  

Read: How to Provide Quality Services for Australian Accounting Firms 

What is a Self-Managed Superannuation Fund (SMSF)?

A self-managed superannuation fund or SMSF is a type of retirement fund in Australia where individuals oversee their own investment decisions and management. It can have no more than six members and as a member, it must be a trustee of the fund or can assign a corporate trustee. 

Contrasting to other superfunds, SMSFs provide members (trustees) with direct control allowing them to invest in several assets such as cash, shares and properties. It continues to be a popular choice for Australian seeking greater flexibility and control.  

Currently, approximately 1/3 of Australia’s superannuation is now held in SMSFs. As of March 2024, per ATO, the total number of members for the SMSF sector is almost at 1,148,481 and there are almost 616,400 SMSFs.   

What are the Benefits of a Self-Managed Superannuation Fund (SMSF)? 

Superannuation or pension programs are mandatory for employees in Australia. Usually, companies set up pension programs for their employees wherein a set portion of their monthly income goes to their chosen super fund to help fund their retirement years. However, these programs set up by companies may sometimes not be flexible – such as the terms being challenging for an employee’s financial capacity.  
 
With this, an SMSF gives employees the flexibility to still make sure they set up a fund for themselves for retirement without having to comply with stringent policies that may not compliment their current situation and financial capacity.  

Some of the benefits of a SMSF include:  

Tax Advantages  

Members can put in tax strategies that best benefit them, especially in retirement.  

Control  

SMSF members can enjoy autonomy over their investment decisions like where and how to invest the funds. 

Flexibility 

SMSFs are tailored with rules suited to specific needs and circumstances. Members can invest in a wider range of assets which is not available with other superannuation funds. 

Retirement Planning  

SMSFs provide benefits that can help your retirement plan such as giving you options for effective estate planning  

What are the Challenges of a Self-Managed Superannuation Fund (SMSF)? 

Despite having advantages, establishing an SMSF has downsides too.  Recommending it depends on individual circumstance. They can be suitable for those who are willing to play an active part in managing financial affairs and have good understanding in roles and responsibilities as an SMSF trustee.  

It is worth it, if you are willing to make the necessary effort to make sure your funds are well taken care of. 
 
 

Here are some challenges to consider:  
 

Responsibilities of Being a Trustee 

All decisions are generally handled by you as the trustee unlike in Industry or Retail Superfunds where the investment decisions are made by an investment manager.  

Restricted Diversification Potential 

There are investments unavailable to SMSFs, especially those which have low overall account balances in contrast with large superannuation funds.  

Costs Of Running 

Though costs are sometimes fixed, if SMSFs are low in value or doesn’t grow quickly, it won’t be a better choice since costs will outweigh the balance of an SMSF. 

Absence of Compensation Arrangements  

In case of fraud or theft, members of SMSF don’t have compensation schemes mainly because they mostly oversee and are responsible for the overall management of the fund.  

The bottom line is, a Self-Managed Superannuation Fund is definitely a great way for individuals to have greater control and flexibility when it comes to retirement funds. However, the responsibilities and challenges that come with managing an SMSF must be carefully considered.  

By working with outsourced SMSF accountants, you can optimize your SMSF’s performance. With expert guidance, you can fully leverage the advantages of an SMSF without the complexities and risks of managing it on your own, allowing you to focus on achieving your retirement goals. 
  

Read Next: How Can Financial Wealth Management Benefit your Company 

Get the Right Support for your Wealth Management Needs 

 
D&V Philippines provides scalable finance and accounting solutions that can adapt to any landscape.  

If you’re interested in learning more about our services, schedule a free consultation with us or download our Your Talent Sourcing Partner Whitepaper to see how we value our talents! 

This article has been written in collaboration with Aly Tagamolila, a content specialist at D&V Philippines.